Prior Involvement As Advisor To Debtor Company – Possible Bar To Appointment In Restructuring Proceedings

Financial institutions need to be mindful of the effect of the engagement of financial advisors with respect to their special loan clients. Recently, in Re GuestLogix Inc, the Ontario Superior Court of Justice held that the prior engagement by the debtor company of Deloitte LLP to review certain revenue recognition issues of GuestLogix Inc., later acted as a bar to the appointment of Deloitte Restructuring Inc. as GuestLogix's Monitor in its CCAA proceedings. Instead, the Court appointed PricewaterhouseCoopers Inc. as Monitor upon the motion by one of the secured creditors. If there is concern regarding the prior involvement of a financial advisor in a debtor's affairs, this concern, and possible opposition to the appointment of the financial advisor as the debtor's court-appointed Monitor or Receiver, likely should be raised at the application for the Initial Order or Receivership Order, as the case may be.